Federal Court Strikes Down Pentagon Risk Label Against AI Firm Anthropic

A federal judge has delivered a major setback to the U.S. Department of Defense, ruling that its decision to penalize artificial intelligence developer Anthropic with a "supply chain risk" designation was unlawful and unconstitutional.

In a decision handed down on Thursday, U.S. District Judge Rita Lin of the Northern District of California ordered the Pentagon to immediately remove the designation. Lin determined that the military's action against Anthropic constituted unlawful retaliation under the First Amendment and denied the company due process under the Fifth Amendment.

A Conflict Over Safety Guardrails

The dispute originated earlier this year when Anthropic refused to remove internal safety guardrails built into its Claude AI model. The company maintained that its systems were not sufficiently reliable for use in autonomous weaponry or mass surveillance operations.

Defense Secretary Pete Hegseth took action in February, designating Anthropic as a supply chain risk. Hegseth argued that private entities should not restrict military operations. The label—traditionally reserved for firms linked to hostile foreign governments—effectively banned the Defense Department and its primary contractors from using Anthropic's technology. Anthropic subsequently filed a lawsuit in March.

Rejection of National Security Claims

In her ruling, Judge Lin rejected the Defense Department's argument that its lack of trust in Anthropic justified the blacklisting.

"The empty invocation of national security is not a blank check to punish and retaliate against government critics," Lin wrote. She stated that evidence indicated the Pentagon intended to make an example of Anthropic for challenging government stance, rather than acting on a legitimate concern that the company would compromise its AI models.

Lin also noted that non-military federal agencies continued to meet and engage with Anthropic after the Pentagon issued its label, contradicting claims that the firm presented a national security threat.

Next Steps

Following the ruling, an Anthropic spokesperson expressed satisfaction with the outcome, affirming the firm's intention to collaborate productively with federal agencies on national security applications. The Department of Defense has not issued an official response to the judgment.

While this ruling resolves the California case, Anthropic continues to pursue a secondary lawsuit challenging the designation in a Washington, D.C. federal court.